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Research on index funds done by Cafemutual based on September 2022 data shows that SBI Nifty Index Fund, UTI Nifty 50 Index Fund, HDFC Index S&P BSE Sensex Fund, Navi Nifty 50 Index and HDFC Index Fund Nifty 50 Fund have the lowest tracking error among 50 index funds.
Among midcap focused index funds, Aditya Birla Sun Life Nifty Midcap 150 Index Fund has the lowest tracking error of 0.13. Similarly, in small cap space, Aditya Birla Sun Life Nifty Smallcap 50 Index Fund has the lowest tracking error of 0.14.
In the flexi and factor space, Motilal Oswal Nifty 500 Index Fund and Nippon India Nifty 50 Value 20 Index Fund have the lowest tracking error.
Tracking error is the annualized difference between standard deviation of the fund and its benchmark. Tracking error is the extent to which returns of an index fund has deviated from its underlying index. Statistically, tracking error is the difference between annualised standard deviation of the fund and its benchmark.
Since passive funds seek to replicate the index as closely as possible, a lower tracking error signifies better performance.
Tracking difference is the variance between index and ETF performance.
Here are the top 3 funds across various categories with the lowest tracking error.
Large: The top 3 reported schemes out of a total of 37
|
Rankings |
Scheme |
Tracking error |
|
1 (2 Schemes) |
SBI Nifty Index Fund |
0.3 |
|
UTI Nifty 50 Index Fund |
||
|
2 (2 Schemes) |
HDFC Index S&P BSE Sensex Fund |
0.4 |
|
Navi Nifty 50 Index Fund |
||
|
3 |
HDFC Index Fund Nifty 50 Plan |
0.5 |
Mid: The top 3 reported schemes out of a total of 3
|
Rankings |
Scheme |
Tracking error |
|
1 (2 Schemes) |
Aditya Birla Sun Life Nifty |
0.13 |
|
Midcap 150 Index Fund |
||
|
2 |
Motilal Oswal Nifty Midcap 150 Index Fund |
0.14
|
|
3 |
Nippon India Nifty Midcap 150 Index Fund |
0.17 |
Small: The top 3 reported schemes out of a total of 3
|
Rankings |
Scheme |
Tracking error |
|
1 |
Aditya Birla Sun Life Nifty Smallcap 50 Index Fund |
0.14 |
|
2 |
Motilal Oswal Nifty Smallcap 250 Index Fund |
0.17 |
|
3 |
Nippon India Nifty Smallcap 250 Index Fund |
0.23 |
Flexi: The top 2 reported schemes out of a total of 2
|
Rankings |
Scheme |
Tracking error |
|
1 |
Motilal Oswal Nifty 500 Index Fund |
0.14 |
|
2 |
Motilal Oswal S&P 500 Index Fund |
0.17 |
Debt: The top 3 reported schemes out of a total of 3
|
Rankings |
Scheme |
Tracking error |
|
1 |
Edelweiss NIFTY PSU Bond Plus SDL Apr 2026 50:50 Index Fund |
1.18 |
|
2 |
IDFC CRISIL Gilt 2027 Index Fund |
Not Found |
|
3 |
IDFC CRISIL Gilt 2028 Index Fund |
Not Found |
Factor: The top 2 reported schemes out of a total of 2
|
Rankings |
Scheme |
Tracking error |
|
1 |
Nippon India Nifty 50 Value 20 Index Fund |
0.14 |
|
2 |
UTI Nifty200 Momentum 30 Index Fund |
0.16 |
Another interesting aspect that the analysis has captured is tracking difference. Tracking difference is simply the difference between returns generated by the fund and its benchmark.
In large cap, Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund,HDFC NIFTY50 Equal Weight Index Fund and L&T Nifty Next 50 Index Fund have the lowest tracking difference of -0.39, -0.74 and -0.77, among 39 schemes.
While Motilal Oswal Nifty Midcap 150 Index Fund has lowest tracking difference of -0.29 in mid cap space, Aditya Birla Sun Life Nifty Smallcap 50 Index Fund has the tracking difference of -0.31 (lowest among all small cap index funds).
In flexi space, Motilal Oswal Nifty 500 Index Fund and Motilal Oswal S&P 500 Index Fund have the lowest tracking difference.
Large: The top 3 reported schemes out of a total of 39
|
Rankings |
Scheme |
Tracking difference |
|
1 |
HDFC NIFTY50 Equal Weight Index Fund |
-0.63 |
|
2 |
Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund |
-0.74 |
|
3 |
L&T Nifty Next 50 Index Fund
|
-0.77 |
Small: The top 3 reported schemes out of a total of 3
|
Rankings |
Scheme |
Tracking difference |
|
1 |
Aditya Birla Sun Life Nifty Smallcap 50 Index Fund |
-0.31 |
|
2 |
Nippon India Nifty Smallcap 250 Index Fund |
-0.99 |
|
3 |
Motilal Oswal Nifty Smallcap 250 Index Fund |
-1.12 |
Mid: The top 3 reported schemes out of a total of 3
|
Rankings |
Scheme |
Tracking difference |
|
1 |
Motilal Oswal Nifty Midcap 150 Index Fund |
-0.29 |
|
2 |
Aditya Birla Sun Life Nifty Midcap 150 Index Fund |
-0.35 |
|
3 |
Nippon India Nifty Midcap 150 Index Fund |
-0.63 |
Flexi: The top 2 reported schemes out of a total of 2
|
Rankings |
Scheme |
Tracking difference |
|
1 |
Motilal Oswal Nifty 500 Index Fund |
-0.48 |
|
2 |
Motilal Oswal S&P 500 Index Fund |
-1.05 |
